Charters for Supertankers Surge to 6-Year High

BW Utik, a 299k dwt VLCC built in 2001, image courtesy BW Group

July 12 (Bloomberg) — Bookings of the largest oil tankers jumped to the highest for the time of year since at least 2007 as demand for crude cargoes accelerates before a surge in oil refining projected by the International Energy Agency.

Traders and oil companies hired 126 very large crude carriers to load in July, according to data today from Marex Spectron Group, a London-based commodities and freight- derivatives broker. There are still more charters to arrange and it’s the second consecutive month when bookings have been at the highest for the period in Marex data starting in January 2007. The vessels each carry 2 million barrels.

Rates on the benchmark Saudi Arabia to Japan route rose fourfold to $24,939 a day since the end of June, according to prices from the Baltic Exchange, a publisher of freight costs on more than 50 maritime routes. Global refinery throughput will rise 3 percent between July and September from the second quarter, an “exceptionally high” increase, the IEA, an adviser to 28 oil-consuming nations, said yesterday in a report.

“Bookings are running at elevated records now to be able to deliver crude during the period of peak demand,” said Harry Tchilinguirian, head of commodity markets at BNP Paribas SA in London. “We should progressively see some slowing over the next one to two months as refiners would have stocked up on their crude requirements.”

The rates increase is helping owners to contend with VLCC earnings that averaged $6,838 a day this year, the lowest since at least 1997, according to data from Clarkson Plc, the world’s largest shipbroker. Frontline Ltd., the operator led by billionaire John Fredriksen, said May 30 it needs daily returns of $25,500 to break even.

Chinese Refineries

Chinese refineries are returning from maintenance and their processing rates were also curbed by rains in the second quarter, the IEA said. Global throughput for the year will peak next month at 77.2 million barrels a day, a 2.1 percent increase since January, the IEA said.

The number of VLCCs sailing for Chinese ports rose to 66, the highest since April, according to ship-tracking data compiled by weekly Bloomberg from IHS Fairplay, a Redhill, England-based maritime research company.

There are 15 percent more VLCCs in the Persian Gulf available for loading in the next 30 days than cargoes, according to the median estimate of six shipbrokers and owners in a Bloomberg News survey July 9. That’s the smallest excess since June 6, survey data showed.

“We have been expecting China to increase demand to replace drawn stocks and fill additional storage coming on stream,” Simon Newman, head of tanker research in London at ICAP Shipping International Ltd., said by e-mail today. “Now we are starting to see this come to fruition.”